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How to track credit card payments when you carry a balance

Nybor

I just realized by setting up the credit cards and tracking the payments as transfers, they're not being captured in the spending report. As this is debt, and not merely the transactions being paid each month as they are incurred, my spending is vastly understated in the reporting. What do people do to accurately capture it?

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Accepted answers

RichardSchreyer

Try using the cash flow Report customizing to include all Transfers under the advanced tab and see if that works for you

Tom Young

"it seems like it IS an expense - a debt expense, because I'm trying to pay down the debt."

It's not at all uncommon that people characterize the payment of a debt as a form of "expense"; it certainly "feels like" an expense, doesn't it?

The ACCOUNTING reason that paying down debt, debt that you've RECORDED on your balance sheet, is that a debt payment DOES NOT change your Net Worth.

An example: Let's say you have a very simple balance sheet, you have $5,000 in your checking account, and have a balance on your credit card of $4,000. Your net worth is then $5,000 - $4,000 = $1,000. Now let's say you pay $200 to the credit card company. After that payment you have $4,800 in your checking account and the balance owed on the credit card is $3,800. Your new net worth is $4,800 - $3,800 = $1,000. You net worth hasn't changed.

Now if you've got an even simpler balance sheet, one that only has the checking account on it, then what's in the checking is, effectively, your net worth, (In the real world that's not true, but on your Quicken balance sheet, that's what you'd see.) So in that situation every dollar spent out of the checking account and every dollar earned that flows into the checking account becomes your Quicken net worth. In that case you actually DO need to account for payments against that off-balance sheet debt as a form of "expense", even if all the accountants tell you it isn't "really" an expense.

In that case setting up your Spending report in the fashion I explained should work just fine. (I wouldn't set Transfers as "Include all" because if your balance sheet in Quicken has even one more Account in it - a Savings Account for example - then every Transfer between the Checking Account and Savings Account you make will also show up as a form of "Income" or "Expense.")

All comments

splasher

I think we have a terminology problem here. Spending is when the charge is made to the credit card. Making the payment to the credit card company is cash flow. You are trying to link the two and that is where the rub is.

Sceptic

@Nybor credit card payments are not an expense, they are simply payments for expenses that already occurred. The actual expense are the items purchased with the credit card. For your credit cards, have you set up accounts on Quicken to track the purchases made with the credit card? If so, the purchases are the expense. The credit card payment itself is not an expense, but simply a reimbursement to the credit card for items purchased.

mshiggins

@Nybor it sounds like you may need to update your spending reports to include the credit card accounts you have set up in Quicken.

Tom Young

I'll echo the above posts about the charges you make on the credit card as being the actual "expense", while your payment is really "cash flow", and that's the "most correct" way of setting up your financial statements.

However, if you really do want to count the payments to the credit card company as "expenses", you can do that.

Customize the report by deselecting the credit card Account under the "Accounts" tab in the customization screen, then under the "Categories" tab make sure that the credit card Account IS selected. Then, under the "Advanced" tab set Transfers to "Exclude internal."

That should result in your charges NOT being included as "expenses" and the payments on the credit card Account DO show up as "expenses." They are your financial statements so you can set them up as you see fit.

Also, you can have several "saved" spending reports so you can set them up both ways - one showing the charges as expense, the other showing payments as expense. The first presentation is correct accounting, the second presentation reflects cash flow.

Nybor

Thanks for the responses. I think my confusion stems from the fact that I am carrying a balance on the card(s). I just started using Quicken again in June - I've previously used it, but not properly (meaning I didn't track all accounts or credit cards, just the main chequing and used it more as a budgeting tool).

So if I have a card that has a balance on it, and I'm actively paying $x towards that card each week/month, but not using the card for expenses, it seems like it IS an expense - a debt expense, because I'm trying to pay down the debt. But it's not a loan in the traditional sense. So each payment that is entered as a transfer in my chequing account register allows me to reconcile the credit card accounts properly, but transfers don't show up in the spending reports so it feels like it is understating my actual expenses for the month.

Am I just overthinking this? I will be reading your responses more thoroughly to see if playing with the reporting is the solution I'm looking for. I appreciate the insights!

RichardSchreyer

Try using the cash flow Report customizing to include all Transfers under the advanced tab and see if that works for you

Tom Young

"it seems like it IS an expense - a debt expense, because I'm trying to pay down the debt."

It's not at all uncommon that people characterize the payment of a debt as a form of "expense"; it certainly "feels like" an expense, doesn't it?

The ACCOUNTING reason that paying down debt, debt that you've RECORDED on your balance sheet, is that a debt payment DOES NOT change your Net Worth.

Nybor

Brilliant…. I get it. Thank you! I guess the "expense" piece is being captured in the interest charges on the card each month anyway, so if what I'm truly looking for is my monthly required cash outflows, I am still capturing it. I am going to run the report as you suggested, thank you again!